Giving Money to the Inca: Experiments and Theory on Social Norms and Tax Compliance in Peru

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Abstract

We report data from an experiment in Peru where subjects anonymously
decide how much of their endowment they donate to the Peruvian government. The
standard rational choice model and several well-known models of non-selfish preferences
predict zero giving. Yet we observe that around 75% of the subjects give something (N =
164), with substantial heterogeneity. Further, individual donations depend negatively on
(a) beliefs about corruption in Peru and positively on (b) level of support of the actual
government and (c) beliefs about the average donation by other subjects. Our data is
consistent with a theory based on consequentialist norms, which we develop in detail.
This paper contributes to a recent literature on tax morale emphasizing the importance of
non-standard motivations on tax compliance, and suggests that taxpayers are willing to
give money to the government (e.g., paying taxes) if they believe that enough others give
as well and that taxes are not wasted or ‘stolen’ by the government, but used to promote
social welfare.